By HANS VON DER BURCHARD
Europe dramatically sharpened its political stance against China on Tuesday by slamming Beijing as a "systemic rival" for the first time.
In a strategic communication mapping out 10 proposals for dealing with Beijing, the European Commission also slapped down countries such as Italy for aligning too closely with China's landmark One Belt, One Road program, which promotes Chinese trade via infrastructure running across Asia into Europe.
In a departure from its usual softly-softly approach on Beijing, the EU called China “an economic competitor in pursuit of technological leadership and a systemic rival promoting alternative models of governance.”
This hardening tone in Brussels chimes with Franco-German plans to build a more defensive European industrial strategy, bolstered by European champions in sectors ranging from telecoms to heavy engineering. In a sign that Berlin is strongly influencing the strategy, Germany's main business lobby, the BDI, has also recently started describing Beijing as a "systemic competitor."
"There is a growing appreciation in Europe that the balance of challenges and opportunities presented by China has shifted. In the last decade, China's economic power and political influence have grown with unprecedented scale and speed, reflecting its ambitions to become a leading global power," the communication said.
"In the absence of a European strategy, China has managed to get a foot in the door in a variety of European capitals." — Marietje Schaake, Dutch MEP
The EU's language shows a perceptible change of tack: The last EU-China strategy, adopted about three years ago, was guarded in its criticism of China's trade practices, such as strategic takeovers of key European technology producers as part of the Made in China 2025 strategy.
"What we want is to avoid to end up in a situation where we are forced to compete with public subsidies," European Commission Vice President Jyrki Katainen said. "We believe in social market economy, and we are not in favor of subsidized economy."
"In the absence of a European strategy, China has managed to get a foot in the door in a variety of European capitals," said Marietje Schaake, a Dutch member of the European Parliament. "China is adept in playing European countries against each other, which allows a Chinese investment in a Greek port to block a common EU position on human rights in China," she added. "These divisions need to end."
The Chinese Mission to the EU played down any notion of conflict. “It is our hope that the EU could view China’s development and fresh efforts to promote reform and opening-up in an objective, reasonable and fair light,” it said.
A Continent divided
China's commercial reach in Europe is a key political dividing line across the Continent. Many Southern European nations argue Germany is hypocritical to complain about the scale of Chinese investment when it was Berlin that pushed hard for the sale of some of their prime assets during the financial crisis. Germany's river harbor of Duisburg has also been a conspicuous beneficiary of the One Belt, One Road program.
European Commission Vice President and Commissioner for Jobs, Growth, Investment and Competitiveness Jyrki Katainen | John Thys/AFP via Getty Images
Beijing's growing power has become particularly visible as Italy moves to become the first G7 country to join the One Belt, One Road strategy. Rome’s flirtation with Beijing’s transcontinental project, as well as potential Italian debt sales to China, have triggered alarm in Brussels and Washington, where officials fear that such steps would open a backdoor for China to influence European politics.
The new Commission strategy takes a clear swipe at Rome: “Neither the EU nor any of its member states can effectively achieve their aims with China without full unity,” it says.
Katainen told reporters that 13 EU countries have signed a Memorandum of Understanding with China's Belt and Road project. He made clear that they all must follow clear rules.
"All the member states, and also Belt and Road operators, must comply with our regulations and rules, which we have when it comes to competition and transparency," he said. "If the Belt and Road initiative is providing financing to the projects, it means that the member states must pay the loans back. So, there is no free lunches."
Ten concrete actions
The strategy proposes 10 “concrete actions” concerning China, which are supposed to be discussed and endorsed by EU leaders at their meeting on March 21-22.
The paper also said that Europe needs to do more concerning the security discussion around Huawei and the future of telecoms.
The Commission called on China to deliver on World Trade Organization reforms, “in particular on subsidies and forced technology transfers,” and wants to conclude an agreement on protections for investors by 2020.
“Unfortunately, the speed has been very slow," Katainen said of trade negotiations with China in general. "We have not seen major openings from the Chinese side toward our companies or the rest of the world.” He added that he hopes that geographical investment negotiations could be wrapped up "swiftly."
The China strategy comes amid concerns in Brussels that China might strike a dealwith U.S. President Donald Trump that grants unilateral market access and benefits to American companies, while leaving the EU out in the cold.
The Commission strategy is more positive on an EU-China aviation safety deal, saying that should be inked “in the coming weeks."
The paper also said that Europe needs to do more concerning the security discussion around Huawei and the future of telecoms.
"5G networks will provide the future backbone of our societies and economies, connecting billions of objects and systems," it said. "To safeguard against potential serious security implications for critical digital infrastructure, a common EU approach to the security of 5G networks is needed."
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